Ad-blocking by Apple might spoil the barrel

Customer data – gathering it, analyzing it and monetizing it, is the mobile internet’s hot topic of the moment. And operators need to pay close attention. Last month it was Spotify in the news for its revamped T&Cs that contained unwanted intrusion into its users’ personal lives. This month, it’s Apple’s new iOS 9 that is gathering attention.

But this time the story has a twist, and the motivation – dressed in terms of improving the customer experience – is rooted in the ongoing war between Apple and Google for dominance in the mobile market.

Apple’s new operating system, for the first time, includes a feature that enables iPhone and iPad users to block all sorts of advertising on web sites – everything from pop-ups to auto play videos, static ads in the sidebar and top-line banners. The new OS lets users download third-party apps that communicate with Apple’s Safari browser to block advertising content.

And while Apple can, rightly, claim that this new feature will improve its users’ web experience – pages will download faster, pop-ups won’t interfere with content you are trying to read etc – the company’s actions not only have a hard commercial intention, they might also suffer from the law of unintended consequences.

The commercial aspect is easy to spot. In advertising terms, Apple really does not have much “skin in the game”. It doesn’t rely on advertising income at all. Contrast that with its rival Google and the commerce becomes clear. Google’s search engine business model relies heavily on being able to serve up relevant advertising based on your searches and web browsing history. Pages you visit have advertising related to you around the edges. If those adverts are blocked, Google could begin to find it difficult to maintain the income from advertisers. Apple plays the white knight, and hits Google’s core revenues, with one simple tactical move.

The unintended consequences could be even more far reaching however. Publishers of all types and sizes, from national newspapers to trade and specialist web sites, depend on advertising for revenues. Some sites mix advertising with a subscription model or live entirely behind a paywall, but there are literally of thousands of news, information and entertainment publishers who need advertising income to maintain revenues and meet their overheads. Widespread ad-blocking could see many of these sites fold, or be forced to adopt a subscription model.

Of course, ad-blocking tools existed before this latest iOS update. But usage was not as widespread. According to the UK’s Guardian newspaper, research shows that only one in 10 people were using ad-blocking software before the Apple update. Now, the third party apps that work with the new iOS sit proudly at the top of the download charts.

For mobile operators – already looking at ways that they too can gather and monetize customer data responsibly and within the scope of current telecoms regulation – the move by Apple also has an impact. The fledgling mobile advertising market is growing, and targeted advertising is much more effective than anything simply broadbrush in its approach. But no advertising is effective if it is blocked.

Operators looking to send their own promotions to customers do have the option of the text message channel – and could potentially also resell that channel based on their customer data knowledge; but as we said in our piece on Spotify last month, for the consumer, all this has to pass the “what’s in it for me” test.

The move by Apple is interesting and is likely to prove popular with consumers. But while it might look simple, the underlying economics are complex and potentially far-reaching. For example, in the UK at the moment we are enjoying the live coverage of the Rugby World Cup on a free-to-air television network. The network survives on advertising and sponsorship.

If my television – during live action – allowed me to block and not display either the advertising or the sponsor’s message; then fairly soon the independent free to air channel would have to become a subscription service. And while people might leave the room during the advert breaks, or fast-forward through them on catch-up, they cannot block them.

Advertisers fund services we enjoy – on our TVs, on our tablets and on our mobiles. Indeed, in some parts of the mobile world, sponsored data means they even subsidise our usage. Wholesale and widespread ad-blocking might equal a short-term benefit that breeds a long-term problem. Maybe this is a case of one, potentially bad, move by Apple spoiling the barrel for everyone.

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Comments

Good reasoning but I disagree with the underlying conclusion. The end of advertisement that’s intrusive and prays on user’s inability to opt out is a good thing. Companies relying in these kind of practices will just have to adapt and offer something else. The market, as always, will be the final judge.

Thanks for your comment, Fausto! I’m not a fan of advertising either, but I do like getting Gmail and Google Maps for free. I acknowledge that there is a price to pay in that Google can use the data it gathers about me to target ads in my direction, and I tend to think it’s a reasonable trade. I fully agree with you that everyone needs the ability to opt out, but if I’m getting a service free of charge then it’s not unreasonable that my opt-out option is to stop using the free service. Do you have a different view? Thanks again!

Andy, thank you for paying attention.
I’m of the same idea when it comes to services provided by Google, Facebook and others. I appreciate the fact that Google makes a living by making my life better. My concern is about advertising companies with models based on spams, excessive plugging and other annoying practices.
For example, TV commercials. They are, due to their wide target, a waste of time to specific consumers. I understand the rationale behind them but still, they subscribe to a business model that’s not evolving with the times. It is obvious that there is a clear interest in the public to depart from that model. That’s why Netflix, Hulu and others alike are here to stay.